In the movie Wall Street 2 Money Never sleeps the main character is Jacob Moore and he is a proprietary trade working for Keller Zabel Investments. Jacob is a young ambitious trader looking to make a name for himself and enjoy a good life. His girlfriend Winnie Gekko is the daughter of the Gordon Gekko. Gordon Gekko is the former high roller who lost all his wealth and was sentenced to eight years in prison for inside trading. The movie starts off with Gordon Gekko being released from prison. Then it focuses on Jacob’s typical day at the office. Jacob is given a bonus in the amount of S1,450,000 from Louis Zabel.
Jacob spends the money by purchasing a wedding ring for Winnie and spending time at a club with a good friend. He uses the remainder of the money to invest in Keller Zabel investments. The next day Keller Zabel investment firm goes bankrupt and the stock losses over 50% of its value. Louis Zabel commits suicide in the aftermath of the crash and this has a significant impact on Jacob. Then Jacob goes to one of Gordon Gekko’s presentations which is centered on the concept of greed is good. He goes into talking about the derivatives and how our generation is going to have nothing because of the past generations greed.
In all of reaility, what Gordon Gekko speaks about in this movie does in fact hold firm ground in our present reality. What a lot of people don’t realize is that the crash of 2008 wasn’t some sort of freak accident that was unpredictable and not foreseen. The truth is the derivatives market business practice operates on the concept of betting and was proven to be a viable option for short term growth, but the long term growth of the derivatives market is known to be unsustainable and will never be able to fulfill its commitments.
The derivatives market essentially is a worldwide ponzi scheme that will crash and the 08 recession is just the beginning. There are several types of derivative, including futures, forwards, swaps and options. In the last twenty years traders have invented a series of ever more complicated deals that they have sold to manufacturers, but primarily to investors. An example is a paper company hedging on interest rates through a deal whereby it would receive a fixed rate of 5. 5 per cent and then pay a floating rate. Another type of derivate instrument is the credit default swap.
These deals were valued at $62 trillion in December 2007. The credit default swaps buyers makes periodic payments to the seller in exchange for the right to a payoff if there is a default or credit write-down in respect of a mortgage or other debt securities they hold. The uncertainties about this huge market are a major factor in the 2007-2008 credit crunch, resulting in serious difficulties for many families and small businesses. The derivative market is unregulated and current estimates on the size is thought to be $1. quadrillion. Derivatives traders have also developed collateralized debt obligations (CDOs) through which a financial institution combines assets of various types (for example “prime” mortgages with “subprime” ones). The packaged debt is then sold to a special purpose vehicle, generally registered offshore in a low tax jurisdiction. The new entity then issues its own equity or bonds to resell the debt to other investors and carve it up into different tranches with different risk ratings using complex mathematical models.
The most actively traded CDOs are those made up of credit default swaps. CDOs are also themselves being repackaged into other CDOs, further obscuring the actual risk and ownership of the underlining assets. The interlinked complexity of these deals feeds volatility rather than reduces it. In Wall Street 2 we see the scene when the major banks are meeting with the Secretary of Treasurer and basically threaten anarchy if there their demands are not met. That’s because many of these banks are too big to fail. This is comparable to our reality of the events in the 2008 crash.
It was the repeal of Glass-Steagal Act that allowed these banks to buy the investment firms that they knew where going to crash because of the toxic derivatives they created. JPMorgan purchased Bear Stearns and two month later they crashed and told congress “They are too big to crash”. How convenient of them to purchase the toxic assets and hold the US government hostage. Wall Street 2 has a powerful theme of greed imbedded into the movie. This mirrors our current society and how they view money. We now live in a world where people view material accumulation as being a good measurement of person’s value, worth and status in this country.
This has created two major social classes. The have nots and the have too much. America is currently experience an extraction of the middle class wealth and seeing this money become distributed into the hands of the few. This has created tremendous amounts of turmoil and given the power of society to the ruling elite whom posse the wealth. At the end of the movie Winnie and Jacob are met with Gordon Gekko and he gives them back the $100 million dollars he stole from them. This supposedly righteous action on Mr. Gekko’s part reunites Winnie and Jacob.
What I find disturbing about this is that the turning point in their relationship was after they received the $100 million dollars. This again supports the theme of greed in this movie. Winnie became upset when she discovered Jacob lost the $100 million and decided to break off the marriage. Then all of a sudden daddy Gekko gives back the $100 million and Winnie figures now it’s time to resume her relationship with Jacob. This movie clearly depicts the shallow mentality of materialistic world. If society is to evolve we must look past our materialistic viewpoint.